Tesco 2015 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2015 Tesco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

How remuneration policy will be applied in 2015/16
Element Operation and opportunity Performance measures
Fixed pay Base salary • CEO – £1,250,000
• CFO – £750,000
• Next review due 1 July 2015. However, no changes to the CEO and CFO salaries
will be made during 2015
• n/a
Pension
(Cash in retirement)
• 25% of base salary cash allowance in lieu of pension • n/a
Benefits • Core benefits include car benefits, driver, security, life assurance, disability and
health insurance, and colleague discount
• Executives are eligible to participate in the Company’s all-employee share schemes,
Sharesave and the Share Incentive Plan, on the same terms as UK colleagues.
Sharesave is an HMRC approved savings related share option scheme. The
Share Incentive Plan is an HMRC approved plan comprising free shares and
partnership shares
Performance-
related pay
Annual bonus
(One-year performance)
(Cash and shares)
• CEO – maximum opportunity of 250% of base salary
• CFO – maximum opportunity of 225% of base salary
• 50% in cash
• 50% in shares, which are deferred for three years
• Malus applies to deferred shares to allow the Committee discretion to scale back
awards made prior to the satisfaction of those awards in certain circumstances
• Clawback applies to cash payments to allow the Committee discretion to take back
cash bonuses for a period of three years from payment in certain circumstances
• 50% based on sales
• 30% based on profit
• 20% based on individual measures
See below for further details
Performance
Share Plan
(Three-year performance)
(Shares)
• CEO – maximum award of 275% of base salary
• CFO – maximum award of 250% of base salary
• Malus provisions apply to awards, allowing the Committee discretion to scale
back awards made prior to the satisfaction of awards in certain circumstances
• Clawback provisions also apply to allow the Committee discretion to take back
exercised awards up to the fifth anniversary of the grant of awards in certain
circumstances
• Shares vest in three years’ time subject
to performance targets being met
• For 2015 awards, performance will be
assessed based 70% on relative TSR
performance compared to a group of
FTSE 100 consumer business and services
companies and 30% on cumulative Retail
Cash Generated from Operations
See below for further details
How do performance measures link to strategy?
Annual bonus
Performance measure Weighting Definition of measure Link to strategy
Sales growth 50% Non-fuel sales
(exc. VAT exc. Petrol Filling
Stations)
To deliver turnaround performance, top-line revenue growth
is fundamental and will be the foundation to ensuring sustainable
levels of profit in the future. This is therefore the main focus
of the business for 2015/16
Profit 30% Trading profit Incentivises the delivery of our strategy by encouraging the creation
of shareholder value through profitable financial strategy
Individual measures 20% n/a Focuses on the delivery of the operational and strategic goals
of the business for the year. For 2015/16 these will include working
capital performance for the Executive Directors to ensure focus on
the efficient use of cash resources
Underpin
To ensure that we do not incentivise Executives to grow sales at the expense of satisfactory profitability, an underpin will apply below which no
portion of the bonus will be paid.
Bonus targets
Bonus targets are considered by the Board to be commercially sensitive as they would give away details of our budgeting to competitors. We
therefore do not publish details of the targets on a prospective basis. However, we will provide full and transparent disclosure of the targets and
the performance against these targets on a retrospective basis in next year’s Annual Report at the same time the bonus outcome is reported.
The targets set are considered to be appropriately stretching taking into account the internal budget and external forecasts.
Performance Share Plan (PSP)
The performance measures for the PSP award for 2015 have been changed from those used in the last few years. The priority is to have
a plan aligned to two key strategic priorities:
• Delivery of significant value to shareholders through share price and dividend performance; and
• Returning the business to be one that generates sustainable, quality cash flow.
Therefore, we will use a combination of relative Total Shareholder Return and Cumulative Retail Cash Generated from Operations
to determine awards.
49Tesco PLC Annual Report and Financial Statements 2015
Other informationGovernance Financial statementsStrategic report